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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
 
 
FORM 8-K
 
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 4, 2019
 
 
 
BRADY CORPORATION
(Exact name of registrant as specified in its charter)
 
 
 
Commission File Number 1-14959
 
 
 
Wisconsin
 
39-0971239
(State of
Incorporation)
 
(IRS Employer
Identification No.)
6555 West Good Hope Road
Milwaukee, Wisconsin 53223
(Address of Principal Executive Offices and Zip Code)
(414) 358-6600
(Registrant’s Telephone Number)
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol
Name of each exchange on which registered
Class A Nonvoting Common Stock, par value $0.01 per share
BRC
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 or the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨






Item 2.02
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On September 6, 2019, Brady Corporation (the “Company”) issued a press release announcing its fiscal 2019 fourth quarter financial results. A copy of the press release is being furnished to the Securities and Exchange Commission as Exhibit 99.1 attached hereto and is incorporated herein by reference.

Item 7.01
REGULATION FD DISCLOSURE

On September 6, 2019, the Company hosted a conference call related to its fiscal 2019 fourth quarter financial results. A copy of the slides referenced in the conference call, which is also posted on the Company's website, is being furnished to the Securities and Exchange Commission as Exhibit 99.3 attached hereto and is incorporated herein by reference.
Item 8.01
OTHER EVENTS

Increase in Annual Dividend
On September 4, 2019, the Company's Board of Directors approved an increase in the annual cash dividend on its Class A Common Stock from $0.85 to $0.87 per share. A quarterly dividend in the amount of $0.2175 per share will be paid on October 31, 2019, to shareholders of record as of the close of business on October 10, 2019. A copy of the press release regarding the dividend is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
Item 9.01
FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits
EXHIBIT NUMBER
DESCRIPTION
99.1
99.2
99.3

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
BRADY CORPORATION
 
 
 
 
 
 
Date: September 6, 2019
 
/s/ AARON J. PEARCE
 
 
Aaron J. Pearce
 
 
Chief Financial Officer and Treasurer



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EXHIBIT 99.1


For More Information:
Investor contact: Ann Thornton 414-438-6887
Media contact: Kate Venne 414-358-5176


Brady Corporation Reports Fiscal 2019 Fourth Quarter Results and Announces its Fiscal 2020 EPS Guidance

Income before income taxes was $47.1 million in the fourth quarter of fiscal 2019 compared to $45.2 million in the fourth quarter of fiscal 2018. Income before income taxes in the fourth quarter of fiscal 2018 included a gain on the sale of the Runelandhs business of $4.7 million.
Diluted EPS was $0.68 in the fourth quarter of fiscal 2019 compared to $0.66 in the same quarter of the prior year. The sale of the Runelandhs business contributed approximately $0.09 per diluted Class A Nonvoting Common Share in the fourth quarter of fiscal 2018.
Sales for the quarter ended July 31, 2019 decreased 0.7 percent due to foreign currency and the impact of the sale of the Runelandhs business in fiscal 2018. Organic revenues increased 1.7 percent in the fourth quarter of fiscal 2019.
Diluted EPS guidance for the full year ending July 31, 2020 announced at a range of $2.45 to $2.55.
 
MILWAUKEE (September 6, 2019)--Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2019 fourth quarter ended July 31, 2019.

Quarter Ended July 31, 2019 Financial Results:
Income before income taxes was $47.1 million for the fourth quarter of fiscal 2019 compared to $45.2 million for the fourth quarter of fiscal 2018. Income before income taxes included a gain on the sale of the Runelandhs business of $4.7 million in the fourth quarter of fiscal 2018.
Net income for the quarter ended July 31, 2019, was $36.6 million compared to $35.0 million in the same quarter last year. The sale of the Runelandhs business increased net income by $4.7 million in the fourth quarter of fiscal 2018.
Earnings per diluted Class A Nonvoting Common Share were $0.68 for the fourth quarter of fiscal 2019, compared to $0.66 in the same quarter last year. Results were increased in the fourth quarter of fiscal 2018 by approximately $0.09 per diluted Class A Nonvoting Common Share due to the sale of the Runelandhs business.
Sales for the quarter ended July 31, 2019 decreased 0.7 percent, which consisted of organic sales growth of 1.7 percent, a decrease in sales of 1.9 percent from foreign currency translation, and a decline in sales of 0.5 percent from the divestiture of our Runelandhs business during the fourth quarter of fiscal 2018. Sales for the quarter ended July 31, 2019 were $295.3 million compared to $297.5 million in the same quarter last year. By segment, sales increased 1.8 percent in Identification Solutions and decreased 7.8 percent in Workplace Safety, which consisted of





organic sales growth of 3.3 percent in Identification Solutions and an organic sales decline of 2.6 percent in Workplace Safety.

Year Ended July 31, 2019 Financial Results:
Income before income taxes increased 8.3 percent, finishing at $164.6 million for the year ended July 31, 2019, compared to $152.0 million last year. Fiscal 2018 results include a gain on the sale of the Runelandhs business of $4.7 million.
Net income for the year ended July 31, 2019, was $131.3 million compared to $91.1 million last year. Fiscal 2018 net income was reduced by $21.1 million due to income tax charges primarily related to the enactment of U.S. tax legislation, and was increased by $4.7 million due to the sale of the Runelandhs business.
Earnings per diluted Class A Nonvoting Common Share were $2.46 for the year ended July 31, 2019, compared to $1.73 last year. Fiscal 2018 results were decreased by approximately $0.40 per diluted Class A Nonvoting Common Share due to income tax charges primarily related to the enactment of U.S. tax legislation, and results were increased by approximately $0.09 per diluted Class A Nonvoting Common Share due to the sale of the Runelandhs business.
Sales for the year ended July 31, 2019 decreased 1.1 percent, which consisted of organic sales growth of 2.8 percent, a decrease in sales of 2.6 percent from foreign currency translation, and a decline in sales of 1.3 percent from the divestiture of our Runelandhs business during fiscal 2018. Fiscal 2019 sales were $1.16 billion compared to $1.17 billion last year. By segment, sales increased 2.0 percent in Identification Solutions and decreased 9.2 percent in Workplace Safety, which consisted of organic sales growth of 4.1 percent in Identification Solutions and an organic sales decline of 0.7 percent in Workplace Safety.

Commentary:
“Our investment in the development of innovative new products, and our dedication to providing excellent customer service continue to drive positive results as we posted our ninth consecutive quarter of organic sales growth,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “We have seen signs of a weakening industrial economic environment. However, our previous investments along with strong execution have helped us continue to generate organic sales growth in this difficult environment. Our priorities in fiscal 2020 are to continue to launch high-quality new products while further developing our new product pipeline, continue our positive momentum in improving all of our businesses, and execute sustainable efficiency gains throughout Brady. We believe that our actions today will result in continued improvement in our financial results and long-term value for our shareholders.”
“Our organic sales growth and our focus on operational efficiencies continue to drive profit improvements and strong cash flow,” said Brady’s Chief Financial Officer, Aaron Pearce. “Our net cash position increased by $100.1 million this fiscal year, finishing at $228.9 million at July 31, 2019. We generated $162.2 million of cash from operating activities this year, we invested $32.8 million in capital expenditures, and we returned $47.9 million





to our shareholders in the form of dividends and share buybacks. Our balance sheet provides significant flexibility for further investments to drive long-term shareholder value and to return funds to our shareholders.”

Fiscal 2020 Guidance:
The Company expects organic sales growth to be approximately 1.5 to 2.5 percent for the year ending July 31, 2020. Brady expects earnings per diluted Class A Nonvoting Common Share to range from $2.45 to $2.55. This guidance is based upon a full-year income tax rate in the low twenties percent range, and depreciation and amortization expense of approximately $25 million. The Company expects to achieve efficiency gains in its manufacturing facilities and in selling, general and administrative expenses while increasing investments in research and development. Capital expenditures are expected to be approximately $35 million during the year ending July 31, 2020. The Company’s fiscal 2020 guidance is based on foreign currency exchange rates as of July 31, 2019.

A webcast regarding Brady’s fiscal 2019 fourth quarter financial results will be available at www.bradycorp.com/investors beginning at 9:30 a.m. Central Time today.

Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect people, products and places. Brady’s products help customers increase safety, security, productivity and performance and include high-performance labels, signs, safety devices, printing systems and software. Founded in 1914, the Company has a diverse customer base in electronics, telecommunications, manufacturing, electrical, construction, medical, aerospace and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and as of July 31, 2019, employed approximately 6,100 people in its worldwide businesses. Brady’s fiscal 2019 sales were approximately $1.16 billion. Brady stock trades on the New York Stock Exchange under the symbol BRC. More information is available on the Internet at www.bradycorp.com.


















###

In this news release, statements that are not reported financial results or other historic information are “forward-looking statements.” These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations.

The use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions, and other factors, some of which are beyond Brady’s control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from: our ability to compete effectively or to successfully execute our strategy; Brady’s ability to develop technologically advanced products that meet customer demands; difficulties in protecting our websites, networks, and systems against security breaches; decreased demand for our products; raw material and other cost increases; extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities; risks associated with the loss of key employees; divestitures and contingent liabilities from divestitures; Brady’s ability to properly identify, integrate, and grow acquired companies; litigation, including product liability claims; foreign currency fluctuations; the impact of the Tax Reform Act and any other changes in tax legislation and tax rates; potential write-offs of Brady’s substantial intangible assets; differing interests of voting and non-voting shareholders; numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady’s U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the “Risk Factors” section within Item 1A of Part I of Brady’s Form 10-K for the year ended July 31, 2019.

These uncertainties may cause Brady's actual future results to be materially different than those expressed in its forward-looking statements. Brady does not undertake to update its forward-looking statements except as required by law.





BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited; Dollars in thousands, except per share data)
 
Three months ended July 31,
 
Year ended July 31,
 
2019
 
2018
 
2019
 
2018
Net sales
$
295,278

 
$
297,499

 
$
1,160,645

 
$
1,173,851

Cost of goods sold
148,698

 
150,047

 
581,967

 
585,560

Gross margin
146,580

 
147,452

 
578,678

 
588,291

Operating expenses:
 
 
 
 
 
 
 
Research and development
11,331

 
11,741

 
45,168

 
45,253

Selling, general and administrative
89,094

 
90,931

 
371,082

 
390,342

Total operating expenses
100,425

 
102,672

 
416,250

 
435,595

 
 
 
 
 
 
 
 
Operating income
46,155

 
44,780

 
162,428

 
152,696

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Investment and other income
1,621

 
1,184

 
5,046

 
2,487

Interest expense
(693
)
 
(715
)
 
(2,830
)
 
(3,168
)
 
 
 
 
 
 
 
 
Income before income taxes
47,083

 
45,249

 
164,644

 
152,015

 
 
 
 
 
 
 
 
Income tax expense
10,470

 
10,298

 
33,386

 
60,955

 
 
 
 
 
 
 
 
Net income
$
36,613

 
$
34,951

 
$
131,258

 
$
91,060

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per Class A Nonvoting Common Share:
 
 
 
 
 
 
 
Basic
$
0.69

 
$
0.67

 
$
2.50

 
$
1.76

Diluted
$
0.68

 
$
0.66

 
$
2.46

 
$
1.73

Dividends
$
0.21

 
$
0.21

 
$
0.85

 
$
0.83

 
 
 
 
 
 
 
 
Net income per Class B Voting Common Share:
 
 
 
 
 
 
 
Basic
$
0.69

 
$
0.67

 
$
2.48

 
$
1.75

Diluted
$
0.68

 
$
0.66

 
$
2.45

 
$
1.72

Dividends
$
0.21

 
$
0.21

 
$
0.83

 
$
0.81

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
52,885

 
51,822

 
52,596

 
51,677

Diluted
53,647

 
52,658

 
53,323

 
52,524






BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
 
July 31, 2019
 
July 31, 2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
279,072

 
$
181,427

Accounts receivable—net
158,114

 
161,282

Inventories
120,037

 
113,071

Prepaid expenses and other current assets
16,056

 
15,559

Total current assets
573,279

 
471,339

Property, plant and equipment—net
110,048

 
97,945

Goodwill
410,987

 
419,815

Other intangible assets
36,123

 
42,588

Deferred income taxes
7,298

 
7,582

Other
19,573

 
17,662

Total
$
1,157,308

 
$
1,056,931

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
64,810

 
$
66,538

Accrued compensation and benefits
62,509

 
67,619

Taxes, other than income taxes
8,107

 
8,318

Accrued income taxes
6,557

 
3,885

Other current liabilities
49,796

 
44,567

Current maturities on long-term debt
50,166

 

Total current liabilities
241,945

 
190,927

Long-term obligations, less current maturities

 
52,618

Other liabilities
64,589

 
61,274

Total liabilities
306,534

 
304,819

Stockholders’ equity:
 
 
 
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,458,841 and 48,393,617 shares, respectively
513

 
513

Class B voting common stock—Issued and outstanding, 3,538,628 shares
35

 
35

Additional paid-in capital
329,969

 
325,631

Retained earnings
637,843

 
553,454

Treasury stock—1,802,646 and 2,867,870 shares, respectively of Class A nonvoting common stock, at cost
(46,332
)
 
(71,120
)
Accumulated other comprehensive loss
(71,254
)
 
(56,401
)
Total stockholders’ equity
850,774

 
752,112

Total
$
1,157,308

 
$
1,056,931







BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
 
Year ended July 31,
 
2019
 
2018
Operating activities:
 
 
 
Net income
$
131,258

 
$
91,060

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
23,799

 
25,442

Non-cash portion of stock-based compensation expense
12,092

 
9,980

Gain on sale of business, net

 
(4,666
)
Deferred income taxes
7,825

 
33,656

Other
2,347

 
(15
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
3,496

 
(16,612
)
Inventories
(9,922
)
 
(7,563
)
Prepaid expenses and other assets
368

 
1,747

Accounts payable and other liabilities
(11,903
)
 
13,106

Income taxes
2,851

 
(3,093
)
Net cash provided by operating activities
162,211

 
143,042

 
 
 
 
Investing activities:
 
 
 
Purchases of property, plant and equipment
(32,825
)
 
(21,777
)
Divestiture of business, net of cash transferred with business

 
19,141

Other
(1,638
)
 
(269
)
Net cash used in investing activities
(34,463
)
 
(2,905
)
 
 
 
 
Financing activities:
 
 
 
Payment of dividends
(44,734
)
 
(42,873
)
Proceeds from exercise of stock options
23,466

 
12,099

Purchase of treasury stock
(3,182
)
 
(1,462
)
Proceeds from borrowing on credit facilities
13,637

 
23,221

Repayment of borrowing on credit facilities
(13,568
)
 
(78,419
)
Other
(3,247
)
 
(3,246
)
Net cash used in financing activities
(27,628
)
 
(90,680
)
 
 
 
 
Effect of exchange rate changes on cash
(2,475
)
 
(1,974
)
 
 
 
 
Net increase in cash and cash equivalents
97,645

 
47,483

Cash and cash equivalents, beginning of period
181,427

 
133,944

 
 
 
 
Cash and cash equivalents, end of period
$
279,072

 
$
181,427






BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
 
Three months ended July 31,
 
Year ended July 31,
 
2019
 
2018
 
2019
 
2018
NET SALES
 
 
 
 
 
 
 
ID Solutions
$
221,817

 
$
217,796

 
$
863,100

 
$
846,087

Workplace Safety
73,461

 
79,703

 
297,545

 
327,764

Total
$
295,278

 
$
297,499

 
$
1,160,645

 
$
1,173,851

 
 
 
 
 
 
 
 
SALES INFORMATION
 
 
 
 
 
 
 
ID Solutions
 
 
 
 
 
 
 
Organic
3.3
 %
 
2.4
 %
 
4.1
 %
 
3.4
 %
Currency
(1.5
)%
 
0.7
 %
 
(2.1
)%
 
2.3
 %
Total
1.8
 %
 
3.1
 %
 
2.0
 %
 
5.7
 %
Workplace Safety
 
 
 
 
 
 
 
Organic
(2.6
)%
 
3.0
 %
 
(0.7
)%
 
0.7
 %
Currency
(3.3
)%
 
1.6
 %
 
(3.7
)%
 
4.6
 %
Divestitures
(1.9
)%
 
(2.3
)%
 
(4.8
)%
 
(0.6
)%
Total
(7.8
)%
 
2.3
 %
 
(9.2
)%
 
4.7
 %
Total Company
 
 
 
 
 
 
 
Organic
1.7
 %
 
2.5
 %
 
2.8
 %
 
2.6
 %
Currency
(1.9
)%
 
1.0
 %
 
(2.6
)%
 
3.0
 %
Divestitures
(0.5
)%
 
(0.6
)%
 
(1.3
)%
 
(0.2
)%
Total
(0.7
)%
 
2.9
 %
 
(1.1
)%
 
5.4
 %
 
 
 
 
 
 
 
 
SEGMENT PROFIT
 
 
 
 
 
 
 
ID Solutions
$
45,642

 
$
36,515

 
$
164,953

 
$
143,411

Workplace Safety
6,724

 
10,675

 
23,025

 
31,712

Total
$
52,366

 
$
47,190

 
$
187,978

 
$
175,123

SEGMENT PROFIT AS A PERCENT OF NET SALES
 
 
 
 
 
 
 
ID Solutions
20.6
 %
 
16.8
 %
 
19.1
 %
 
16.9
 %
Workplace Safety
9.2
 %
 
13.4
 %
 
7.7
 %
 
9.7
 %
Total
17.7
 %
 
15.9
 %
 
16.2
 %
 
14.9
 %

 
Three months ended July 31,
 
Year ended July 31,
 
2019
 
2018
 
2019
 
2018
Total segment profit
$
52,366

 
$
47,190

 
$
187,978

 
$
175,123

Unallocated amounts:
 
 
 
 
 
 
 
Administrative costs
(6,211
)
 
(7,076
)
 
(25,550
)
 
(27,093
)
Gain on sale of business

 
4,666

 

 
4,666

Investment and other income
1,621

 
1,184

 
5,046

 
2,487

Interest expense
(693
)
 
(715
)
 
(2,830
)
 
(3,168
)
Income before income taxes
$
47,083

 
$
45,249

 
$
164,644

 
$
152,015




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EXHIBIT 99.2

For More Information Contact:
Investor Contact: Ann Thornton (414) 438-6887
Media Contact: Kate Venne (414) 358-5176


Brady Corporation increases its dividend to shareholders for the 34th consecutive year

MILWAUKEE (September 5, 2019) - On September 4, 2019, Brady Corporation’s (NYSE: BRC) Board of Directors approved an increase in the annual dividend to shareholders of the Company’s Class A Common stock from $0.85 per share to $0.87 per share. A quarterly dividend to shareholders of the Company's Class A Common Stock of $0.2175 per share will be paid on October 31, 2019, to shareholders of record at the close of business on October 10, 2019. This dividend represents the 34th consecutive annual increase in dividends.
Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect people, products and places. Brady’s products help customers increase safety, security, productivity and performance and include high-performance labels, signs, safety devices, printing systems and software. Founded in 1914, the Company has a diverse customer base in electronics, telecommunications, manufacturing, electrical, construction, medical, aerospace and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and as of July 31, 2018, employed approximately 6,200 people in its worldwide businesses. Brady’s fiscal 2018 sales were approximately $1.17 billion. Brady stock trades on the New York Stock Exchange under the symbol BRC. More information is available on the Internet at www.bradycorp.com.

###



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Brady Corporation F’19 Q4 Financial Results September 6, 2019
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Forward-Looking Statements 2 In this presentation, statements that are not reported financial results or other historic information are “forward-looking statements.” These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations. The use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions, and other factors, some of which are beyond Brady’s control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from: our ability to compete effectively or to successfully execute our strategy; Brady’s ability to develop technologically advanced products that meet customer demands; difficulties in protecting our websites, networks, and systems against security breaches; decreased demand for our products; raw material and other cost increases; extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities; risks associated with the loss of key employees; divestitures and contingent liabilities from divestitures; Brady’s ability to properly identify, integrate, and grow acquired companies; litigation, including product liability claims; foreign currency fluctuations; the impact of the Tax Reform Act and any other changes in tax legislation and tax rates; potential write-offs of Brady’s substantial intangible assets; differing interests of voting and non-voting shareholders; numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady’s U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the “Risk Factors” section within Item 1A of Part I of Brady’s Form 10-K for the year ended July 31, 2019. These uncertainties may cause Brady's actual future results to be materially different than those expressed in its forward-looking statements. Brady does not undertake to update its forward-looking statements except as required by law.
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Q4 F’19 Financial Summary 3 • Sales were $295.3M in Q4 of F’19 compared with $297.5M in Q4 of F’18. – Organic sales increased 1.7%. – Foreign currency translation decreased sales 1.9%. – Sale of business decreased sales 0.5%. • Gross profit margin of 49.6% in Q4 of F’19 is consistent with Q4 of F’18. • SG&A expense of $89.1M (30.2% of sales) in Q4 of F’19 compared with $90.9M in Q4 of F’18. – Q4 F’18 SG&A expense was reduced by a $4.7M gain on sale of business. • R&D expense of $11.3M (3.8% of sales) in Q4 of F’19 compared with $11.7M (3.9% of sales) in Q4 of F’18. • Income before income taxes of $47.1M in Q4 of F’19 compared with $45.2M in Q4 of F’18. – Q4 F’18 positively impacted by a $4.7M gain on sale of business. • Net income per Class A Diluted Nonvoting Common Share was $0.68 in Q4 of F’19 compared with $0.66 in Q4 of F’18. – Q4 F’18 diluted EPS positively impacted by a $0.09 gain on sale of business.
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Sales Overview 4 SALES (millions of USD) $305 $298 $297 $295 $295 $293 $289 $290 $290 $288 $285 $282 $275 $265 $255 Q4 F'17 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Organic Sales 3.0% 1.7% 3.2% 3.2% 2.5% 4.7% 2.3% 2.4% 1.7% Growth Q4 F’19 SALES: Q4 F’19 SALES COMMENTARY: • 1.7% increase in organic sales: • ID Solutions – Organic sales increased in all three regions. • ID Solutions – Organic sales increased 3.3%. • Workplace Safety – The rate of organic sales decline • Workplace Safety – Organic sales decreased lessened in North America. 2.6%. • Foreign currency translation had a negative impact on • 1.9% decrease due to foreign currency translation. sales in the quarter. • 0.5% decrease due to the sale of a business.
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Gross Profit Margin 5 GROSS PROFIT & GPM% (millions of USD) 50.6% 50.3% 50.3% 49.9% 50.0% 49.7% 49.6% 49.5% 49.6% $151 50% $150 $147 $146 $147 $146 $147 $144 $144 $140 45% $125 $100 40% Q4 F'17 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q4 F’19 – GROSS PROFIT MARGIN: • Gross profit margin of 49.6% was consistent with Q4 of F’18. • Costs increased in certain areas including freight and personnel, but were offset by efficiency gains. • We continue to invest in automation and manufacturing efficiencies to offset cost increases.
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SG&A Expense 6 SG&A EXPENSE AND SG&A EXPENSE AS A % of SALES (millions of USD) 34.5% $110 33.9% 34.1% 35% 33.4% 32.8% 32.3% 32.7% $102 $100 33% 30.6% $100 $98 $97 $95 $95 30.2% $93 30% $91 $90 $89 28% $80 25% Q4 F'17 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q4 F’19 – SG&A EXPENSE: • SG&A expense was $89.1M (30.2% of sales) in Q4 of F’19 compared to $90.9M in Q4 of F’18. Q4 F’18 SG&A expense includes a $4.7M gain from the sale of a business. • Excluding the gain on the sale of a business from last year, SG&A expense is down in absolute dollars due to on- going efficiency gains and foreign currency translation. • We continue to drive sustainable efficiency gains in administrative expenses and non-customer facing selling expenses while investing in sales-generating resources.
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R&D Expense 7 R&D EXPENSE AND R&D EXPENSE AS A % of SALES (millions of USD) $14.0 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.8% 3.8% 4.0% 3.6% $12.0 $11.7 $11.7 $11.3 $11.3 $11.4 $11.3 $11.0 $11.1 $10.5 3.5% $10.0 3.0% $8.0 $6.0 2.5% Q4 F'17 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q4INCREASING F’19 – R&D OUR EXPENSE: INVESTMENT IN RESEARCH & DEVELOPMENT: • Investing in R&D to drive future organic sales growth. • Improved new product pipeline. • Two printers launched in the healthcare identification product line during Q4 of F’19.
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Income Before Income Taxes 8 INCOME BEFORE INCOME TAXES (millions of USD) $50 $47.1 $45.2 $45 $41.0 $39.9 $40 $37.0 $35.9 $36.7 $34.8 $35.0 $35 $30 $25 $20 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19 Year on Year Growth 12.2% 12.2% 20.4% 20.7% 26.0% 14.8% 4.8% 10.8% 4.1% Q4 F’19 - INCOME BEFORE INCOME TAXES: • Income before income taxes was $47.1M in Q4 of F’19 compared to $45.2M in Q4 of F’18. • Q4 F’18 income before income taxes includes a $4.7M gain from the sale of a business. Income before income taxes grew 16.0% in Q4 of F’19 excluding this gain on the sale of a business in the prior year. • The increase in pre-tax income was primarily driven by organic sales growth and reduced SG&A expenses.
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Net Income & Diluted EPS 9 NET INCOME (millions of USD) NET INCOME PER CLASS A DILUTED SHARE $0.66 $0.68 $40 $36.6 $0.65 $35.0 $34.8 $0.58 $0.60 $0.55 $30.6 $29.2 $30 $0.48 $0.49 $0.49 $25.2 $25.8 $26.0 $0.40 $20 $0.20 $10 $4.3 $0.08 $0 $0.00 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19 Q4 F’19 – NET INCOME & DILUTED EPS: • Net income was $36.6M in Q4 of F’19 compared to $35.0M in Q4 of F’18. Q4 F’18 net income includes a $4.7M gain on the sale of a business. Excluding this prior year gain on the sale of a business, net income increased by 20.9% in Q4 of F’19. • Diluted EPS was $0.68 in Q4 of F’19 compared to $0.66 in Q4 of F’18. Q4 F’18 diluted EPS includes a $0.09 benefit from the sale of a business. Excluding this prior year gain on the sale of a business, diluted EPS increased by 19.3% in Q4 of F’19.
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Cash Generation & Uses 10 CASH FLOW FROM OPERATING ACTIVITIES (millions of USD) CASH FLOWS IN Q4 OF F’19: $70 $65.3 • Cash flow from operating activities was $65.3M in Q4 of F’19 compared to $53.8M in Q4 of F’18. $60 $52.9 $53.8 $52.7 $50 $46.8 • Free cash flow* was $50.0M in Q4 of F’19 compared to $46.8M in Q4 of F’18. $40 $34.7 $30 $25.4 • Invested $15.3 million in capital expenditures in $18.8 Q4 of F’19. $20 $7.7 $10 • Returned $11.2M to our shareholders in the form of dividends in Q4 of F’19. $0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19 % of Net Income 210% 134% 181% 180% 154% 54% 87% 152% 178% (millions of USD) 3 Mos. Ended 3 Mos. Ended Year Ended Year Ended July 31, 2019 July 31, 2018 July 31, 2019 July 31, 2018 Cash Balance - Beginning of Period $ 238.4 $ 130.9 $ 181.4 $ 133.9 Cash Flow from Operating Activities 65.3 53.8 162.2 143.0 Capital Expenditures (15.3) (7.0) (32.8) (21.8) Proceeds from Sale of Business - 19.1 - 19.1 Dividends (11.2) (10.8) (44.7) (42.9) Debt Borrowings (Repayments) - Net - (3.6) 0.1 (55.2) Effect of Exchange Rates on Cash (0.2) (2.0) (2.5) (2.0) Other 2.1 1.0 15.4 7.3 Cash Balance - End of Period $ 279.1 $ 181.4 $ 279.1 $ 181.4 * Free Cash Flow is calculated as Net Cash Provided by Operating Activities less Capital Expenditures.
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Net Cash 11 NET CASH (millions of USD) DEBT STRUCTURE (millions of USD) $250 $229 $200 $188 Interest July 31, 2019 July 31, 2018 Rate Balance Balance $151 Private Placements: $150 $138 EUR-den. 2010 Series (10-yr.) 4.24% $ (50.2) $ (52.6) $129 TOTAL DEBT $ (50.2) $ (52.6) $100 Cash and Cash Equivalents 279.1 181.4 $73 NET CASH $ 228.9 $ 128.8 $48 $50 $44 $26 $0 Q4 F'17 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 STRONG BALANCE SHEET: • July 31, 2019 cash = $279.1M and debt = $50.2M. • Net cash increased $40.8M in Q4 of F’19. • Approximately half of our cash is held in the United States. • Balance sheet provides flexibility for future investments.
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F’19 Financial Summary 12 Year Ended July 31, 1 2019 2018 Change Sales $ 1,160.6 $ 1,173.9 Organic Sales Growth 2.8% 2.6% Gross Margin 578.7 588.3 % of Sales 49.9% 50.1% Research and Development (45.2) (45.3) Selling, General and Administrative (371.1) (390.3) - 4.9% % of Sales 32.0% 33.3% Operating Income 162.4 152.7 + 6.4% Other Income (Expense) 2.2 (0.7) Income Before Income Taxes $ 164.6 $ 152.0 + 8.3% Less: Gain on Sale of Business - (4.7) Income Before Income Taxes Excluding Gain on Sale of Business $ 164.6 $ 147.3 + 11.7% Net Cash Position $ 228.9 $ 128.8 $ 100.1
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Full-Year F’20 Guidance 13 F’20 Diluted EPS $2.45 to $2.55 F’20 Guidance Assumptions: • Full-year organic sales growth of approximately 1.5% - 2.5%. • Full-year depreciation and amortization expense of approximately $25M. • Income tax rate in the low 20% range. • Full-year capital expenditures of approximately $35M.
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Identification Solutions 14 Q4 F’19 vs. Q4 F’18 (millions of USD) Q4 F’19 SUMMARY: • Revenues increased 1.8%: Q4 F’19 Q4 F’18 Change • Organic = +3.3% Sales $ 221.8 $ 217.8 + 1.8% • Fx = - (1.5)% Segment Profit 45.6 36.5 + 25.0% • Organic sales increased in the low-single digits in the Americas, EMEA, and Asia. Segment Profit % 20.6% 16.8% + 380 bps • Healthcare identification product line grew organic sales in the mid-single digits. • Segment profit as a percent of sales increased due to ongoing efficiency gains in our operations and SG&A SALES & SEGMENT PROFIT % (millions of USD) structure. 22% 21% $240 20% 19% 19% $230 17% 18% 17% 17% 17% 18% 17% $222 $220 $218 $218 16% $214 $211 $212 $210 $209 14% OUTLOOK: $210 $206 12% • Expect F’20 organic sales to grow from 2% to 3%. $200 10% • Anticipate further investments in innovative new products and efficiencies in operations and our SG&A $190 8% structure. $180 6% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19
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Workplace Safety 15 Q4 F’19 vs. Q4 F’18 (millions of USD) Q4 F’19 SUMMARY: • Revenues decreased (7.8%): Q4 F’19 Q4 F’18 Change • Organic = - (2.6%) Sales $ 73.5 $ 79.7 - 7.8% • Fx = - (3.3%) Segment Profit 6.7 10.7 - 37.0% • Divestiture = - (1.9%) Segment Profit % 9.2% 13.4% - 420 bps • Organic sales decreased in the low-single digits in Europe and Australia and decreased in the mid-single digits in North America. • Segment profit negatively impacted by organic sales SALES & SEGMENT PROFIT % (millions of USD) decline, foreign currency translation and the sale of the Runelandhs business in the fourth quarter of last 13% 14% fiscal year. $100 12% $95 10% 9% 10% 8% 9% 9% $90 8% $86 7% 8% 6% $85 OUTLOOK: 6% $80 $81 $80 $80 $78 4% • Expect F’20 organic sales to be approximately flat. $76 $75 • Anticipate Europe and Australia to continue to $75 $73 $73 2% perform well while our North American business $70 0% continues to recover. Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19
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Investor Relations 16 Brady Contact: Ann Thornton Investor Relations 414-438-6887 Ann_Thornton@bradycorp.com See our web site at www.bradycorp.com
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